Paying off credit card

Proinsias

Hi all,

I've recently been made redundant and still hunting for a new job. I did get a little redundancy payment and was hoping to use a good chunk of it to clear debts just incase finding a job proves tough.

I've got a cc with around a grand on it, a few hundred of which is on high interest rates, and a old overdraft of about 500 which is all charges - I got a letter a few months ago telling me that the charges will stand after trying to claim them back a few years ago as per advice from here.

My cc is up to date with payments but as the overdraft is old charges the account has been closed and the debt is with the collectiond dept.

I just spoke to the collections dept dealing with the overdraft and they will accept a 30% reduced settlement, which is nice.

I was planning on paying off the credit card atm but was wondering if it might be worth defaulting on the next payment due, landing the card in the collections dept, and if this would allow me to negotiate a reduced settlement due to my circumstances.

Am I likely to get a reduced settlement figure if the card has just arrived with the collections dept and I explain to them I may not be able to keep up with payments? or would I be best just clearing it atm?

Tixy

You would probably only get a reduced figure after several months of not paying and having the account formally defaulted on your credit file. A default on your credit file is best avoided as it will stay on your file for 6years and affect your ability to get new credit.

With regards to the overdraft - I would ensure you get in in writing from them that the 30% will be in full & final settlement of the debt. Its not unheard of for the remainder of the debt to be sold on to a debt collector if you have no proof that your payment was F&F (factsheet on national debtline website about F&Fs which is worth reading).

Proinsias

Thanks,

I spoke to the manager of the collections dept - he assured me the figure was F&F, advised the call was recorded and said i would have the offer in writing early next week. So that sounds fine so far.

I'll be avoiding the default but thought that maybe ,due to the current climate, anything sitting with collections may be negotiable. I expect you are correct and thanks for the input. I'll probably pay it off in the next few days but figured it might be worth checking in here before I start chucking money at the bank.

Thanks

Fiddlestick

Proinsias wrote: »

I was planning on paying off the credit card atm but was wondering if it might be worth defaulting on the next payment due, landing the card in the collections dept, and if this would allow me to negotiate a reduced settlement due to my circumstances.

You borrowed it and have the ability to pay it back, so do so rather than trying to wriggle out of it - that's pretty insulting to the people on the forum that have genuine financial difficulties and are begging lenders to give them a break and offer a reduced settlement figure.

If you really want to miss payments and trash your credit rating just to save a bit of money then feel free to go right ahead, but it really is not worth it.

Proinsias

Apologies Fiddlestick, not wishing to offend.

I was planning on clearing all the debt, in full, today. Money will be very tight afterwards. The first call was to the overdraft and they advised, as the account was with the collections dept, they would accept a 30% reduced settlement if paid promptly.

Just thought I'd check before clearing the cc, if I clear it in full and a job does not turn up very soon I will be in genuine financial difficulty. I'd rather attempt to negotiate with my cc company this month than be begging my mortgage lender next month, or pulling out the cc to pay it.

From what I gather my credit rating is unlikely to be trashed due the account being with the collections dept for a few days.

There are quite a few charges on the card and I first became aware of this place a few years ago when I was pointed here to reclaim bank charges, which didn't work. The vibe was very much towards reclaiming money and not so much about those wishing to reduce their debts as insulting those worse those off than them.

Fiddlestick

Proinsias wrote: »

Apologies Fiddlestick, not wishing to offend.

Don't worry, it takes a lot to offend me

From what I gather my credit rating is unlikely to be trashed due the account being with the collections dept for a few days.

They are unlikely to send it to collections for a few months, by which point you might already have lost your job and be in that bad situation that you are trying to avoid.

Lenders sometimes ask to see your incomings and outgoings plus a list of your assets before working out some sort of settlement figure or repayment plan. At that point, the fact that you had the money ti pay it off and didn't wouldn't look good for you.

There are quite a few charges on the card and I first became aware of this place a few years ago when I was pointed here to reclaim bank charges, which didn't work. The vibe was very much towards reclaiming money and not so much about those wishing to reduce their debts as insulting those worse those off than them.

Reclaiming "unfair" charges is one thing, but trying to negotiate a cheaper settlement when you *do* have the money is another.

I don't want to be overly harsh, but not paying it off and then going to collections may have long lasting consequences when it comes to late payments or defaults being registered on your credit file.

Proinsias

I think I may have worded myself badly. It was my understanding, at least in the banks that I have worked, that pretty much any account is passed to the collection dept when it is one day behind. If I'm a day late with my cc payment I get a call from the collections dept and will pay it by debit card to aviod a charge.


I wasn't planning on being anything more than a day or two behind. I don't have much experience with credit cards but certainly in other areas of finance as soon as an account shows an arrears status the collection dept can deal with it and are often able to cut deals, like removing a certain percentage of charges for an immidaite settlement. As was done with my overdraft.

I'm not for a moment considering a default or allowing my account to be passed to third party debt collectors. More just curious if say waiting until it is a day behind, getting a call from the collections dept, explaining my circumstances and seeing if the would remove a certain percentage of charges if I clear it and close it straight away.

The debt will be cleared this month I was just wondering if I may be in a better position being a day or two late and speaking to collections, who cut deals especially when there are charges involved, as opposed to speaking to customer services who are generally in no position to cut any deals.

I'm not trying to avoid the debt and wriggle out of it - just wondering if I'll save 50 or 100 quid if I pay it in two weeks instead of today. Money may be very tight in the coming months and whilst I have an oppotunity to be pretty much debt free, not thinking about current overdraught and mortgage, I would like to clear the debt as cheaply as possible. The one thing that has started all this was phoning the bank to clear my old overdraught this morning and them telling me they'd cut 30% off the balance if I paid it as soon as I get the confirmation in writing.

I have already lost my job. I got my last pay cheque today, I do not have another job yet.